Product Recalls

Executive Summary

Recalls of potentially dangerous or defective products are on the rise, in the United States and around the world. The drivers of this trend include increasingly aggressive government regulators with enhanced authority to pursue recalls, technology that makes it easier for consumers to complain about unsatisfactory products and an ever more complex and far-flung global supply chain that is harder for manufacturers to control. As recalls rise, the stakes for businesses involved also grow, in both monetary exposure and damage to reputation; companies can rise or fall depending on how they navigate this tricky terrain. In response, manufacturers are stepping up their in-house testing programs and complying more diligently with government rules for self-reporting when they find health and safety threats. Among the questions being debated: Are companies doing enough to prevent defective goods from reaching the public? Are manufacturers doing enough to notify the public about recalls? Can a brand survive a recall?

Hunter, Richard J., and John H. Shannon, “Products Liability: A Managerial Perspective,” Hunter|Shannon|Amoroso, 2012. Two Seton Hall University law professors delve into modern product liability law and theory in an advanced textbook for business students.

Articles

Candelaria, Christopher, and Galina Hale, “Did Large Recalls of Chinese Consumer Goods Lower U.S. Imports from China?” FRBSF Economic Letter, June 13, 2008, http://tinyurl.com/jbvfpvv. A Federal Reserve Bank of San Francisco economist (Candelaria) and a research adviser (Hale) conclude that the massive U.S. 2007–08 recalls of defective products from China had minimal impact on the volume of imports from China to the U.S.

“Recall: The Food Industry’s Biggest Threat to Profitability,” Tyco Integrated Security, 2012, http://tinyurl.com/hsg57m4. A business security firm argues that an effective “food defense strategy” requires more than compliance with federal mandates. It focuses equally on operational deficiencies that cause the problems leading to recalls.

“Recall Handbook,” U.S. Consumer Product Safety Commission, 2012, http://tinyurl.com/jfqmq9e. The government agency overseeing the safety and recall of consumer products offers manufacturers, importers, distributors and retailers a guide to complying with federal regulations.

Pozo, Veronica F., and Ted C. Schroeder, “Costs of Meat and Poultry Recalls to Food Firms,” Finance and Economics, February 2015, http://tinyurl.com/hhkkfvb. Researchers from Utah State University (Pozo) and Kansas State University (Schroeder) explore whether size, frequency and publicity affect the stock prices of firms issuing meat and poultry recalls.

Shin, Heechang, Robert Richardson and Oredola Soluade, “Assessing Sales Loss from Automobile Recalls Through Event Study: A Toyota Case Study,” Communications of the IIMA, 2012, http://tinyurl.com/jrwvyc9. Iona College researchers determine that sales losses from a major recall often are temporary, lasting as little as five months.

Ramsey, Mike, “Quality Woes a Challenge for Tesla’s High-Volume Car,” The Wall Street Journal, April 20, 2016, http://tinyurl.com/hwom3ed. Some Web users and car reviewers are skeptical of Tesla’s Model X sport-utility vehicle after the electric car maker recently recalled 2,700 of the vehicles due to a malfunction in a seat latch that could come undone during collisions.

Young, Angelo, “Volkswagen Recall: Repairing The Carmaker’s Reputation Will Take Years And Won’t Be Fixed By Firing The CEO,” International Business Times, Sept. 21, 2015, http://tinyurl.com/jocyv24. German automaker Volkswagen, which recalled four models after admitting to installing software in some vehicles to deceive emissions testers, must fix structural issues in its company to repair its reputation, crisis management experts say.

Product Testing

Bonar, Samantha, “Organic Pastures raw milk is recalled – again,” Los Angeles Times, Oct. 19, 2015, http://tinyurl.com/jplnavs. The California Department of Agriculture recalled organic whole milk produced by a Fresno County dairy farm and placed it under quarantine after testers detected bacteria in the milk that could cause an infection with painful diarrhea and other problems.

Passary, Anu, “UL Reveals How It Tests Safety Of Hoverboards While Swagway Does U-Turn,” Tech Times, Feb. 24, 2016, http://tinyurl.com/hgv62yc. Illinois-based product testing company UL developed an industry testing standard for hoverboards, toys that federal regulators nearly recalled in February after reports of fires caused by faulty parts, assembly and circuitry.

Smith, Casey, “Blue Bell distributes update on production facilities procedures,” Tulsa World, Jan. 8, 2016, http://tinyurl.com/gt9mrfd. Ice cream maker Blue Bell said it has updated environmental and product testing procedures and will begin offering its products again eight months after a federal recall and investigation linked them to a listeria outbreak.

Public Notification

Bomey, Nathan, “BMW hit with $40M fine for recall violations,” USA Today, Dec. 21, 2015, http://tinyurl.com/h6uy2qh. The National Highway Traffic Safety Administration (NHTSA) fined automaker BMW North America up to $40 million for violating federal regulations requiring companies to promptly notify vehicle owners of recalls and for failing to fix a defect in one of its models that failed a side-impact crash test.

Laing, Keith, “NHTSA chief grilled by Congress on latest air-bag death,” The Detroit News, April 14, 2016, http://tinyurl.com/jmcggsz. NHTSA’s top administrator said while testifying before the U.S. House Energy and Commerce Committee that government efforts to notify the public about car recalls are “not enough.”

Shepardson, David, “Automakers urge insurance companies to remind U.S. drivers of recalls,” Reuters, April 12, 2016, http://tinyurl.com/zgqur86. Two major auto industry trade groups sent letters to U.S. insurance companies asking them to notify customers about recalls on their vehicles when they renew their insurance policies.

Regulators

Jensen, Christopher, “A Record Year of Recalls: Nearly 64 Million Vehicles,” The New York Times, Feb. 12, 2016, http://tinyurl.com/l6s7svt. NHTSA recalled nearly 64 million vehicles in 2015—a record—most commonly due to faulty ignition switches in General Motors cars and dangerous flaws in Takata airbags in various makes and models.

Limbach, James, “Feds complete work on rule on tracking foodborne illnesses,” Consumer Affairs, Dec. 15, 2015, http://tinyurl.com/zfbfybs. The U.S. Food Safety and Inspection Service will require beef manufacturers to improve recordkeeping so that the agency and suppliers can more easily track sources of contaminated beef after issuing recalls.

Migoya, David, and Ricardo Baca, “State issues massive recall of pesticide-tainted marijuana,” The Denver Post, March 17, 2016, http://tinyurl.com/jjwhwnl. Colorado’s marijuana regulator recalled a large quantity of the drug grown over a 22-month period after a state agriculture department investigation confirmed the presence of a widely used but prohibited insecticide in several dozen strains.

Organizations

Center for Science in the Public Interest1220 L St., N.W., Suite 300, Washington, D.C. 20005 202-332-9110 www.cspinet.org Advocates for nutrition, food safety and health and other issues; aims to counter the influence of industry on public opinion and public policies.

Food Policy InstituteNew Jersey Agricultural Experiment Station, Rutgers, The State University of New Jersey, 55 Dudley Road, New Brunswick, NJ 08901-8520 848-932-9145 www.foodpolicy.rutgers.edu Academic research unit of Rutgers that focuses on challenges facing the U.S. food system, especially in the mid-Atlantic region.

U.S. Consumer Product Safety Commission4330 East West Highway, Bethesda, MD 20814 301-504-7923 www.cpsc.gov Independent federal agency charged with protecting the public from unreasonable risks of injury or death associated with the use of consumer products.